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IFR: - Romney’s intention to not re-appoint Fed
Chairman Ben
Bernanke when his term runs out in 2014 could upset the
supportive backdrop for risk assets that has resulted from
ongoing quantitative easing, noted Barclays
strategists Maneesh Deshpande and Rajiv Setia.

“Given how deeply the ‘Fed on hold till 2014’ view is entrenched
into the market, any re-pricing of this probability could have
significant repercussions”.

The assumption that a new Fed Chairman under Romney would be more
hawkish and less accommodating to markets would provide
additional headwinds against economic growth. The market has
already started pricing in an expected change to Fed policy at
the end of 2014, with the expected Fed funds rate for December
2015 rising roughly 20bp since Romney’s performance in the first
debate on October 3.

This assertion is nonsense - IFR needs to do their homework. And
given the resources the publication has it is surprising they
haven't. First of all it is not even clear if Romney is actually
going to replace Bernanke with a hawk or if this is simply part
of the campaign rhetoric to grab the Ron Paul
supporters' vote.

DB: - Governor Romney’s criticism of monetary policy could have
simply been campaign rhetoric intended to win over more
conservative voters during the primary season. Governor Romney,
in the end, might prove that he has campaigned to the more
partisan elements of his party base, but would govern as more of
a centrist. ... given the governor’s markets background, if
elected he might temper any call for abrupt policy changes to
avoid potential negative reactions from risk markets and knock-on
effects on household or corporate savings or investment behavior.

Furthermore, the removal of Bernanke will have little impact on
Fed's policy - even if the new chairman is a hawk, like John
Taylor for example (see discussion). Below is the 2014 FOMC
lineup and a rating from DB. A score of 1 indicates an
ultra-dovish member and a 5 - an ultra-hawkish one. Even by
replacing Bernanke with someone that has a rating of 5 does not
create a hawkish majority among the voting members.

DB: - ... given the rotation of voting seats amongst the regional
Fed presidents, and presuming that the Board of Governors
maintains its current members, even if Bernanke were to leave in
January 2014, it appears to be a stretch to presume that
a majority could be crafted that was sufficiently to materially
change policy, given current fundamentals.

IFR is simply wrong in this assessment - the risk of the
Fed shifting policy due to the outcome of this election is
minimal (whether we like it or not).